Monday, May 5, 2008

McKinsey says Germany in terminal decline

From EVRO Intelligence:According to a McKinsey study, Germany’s middle classes are headed for terminal decline, unless there is a fundamental change in economic policy. The reason is that too many middle class Germans make a living in old and decaying industry. To arrest this trend, the consultancy recommends a set of policies to assure 3% growth. For this happen, 30,000 new companies need to be created every year, the female work participation rate will have to rise, and expenditure will have to be shifted towards training. Special sectors should receive state aid, such as health care, financial sector, and environment (would this be legal under EU law?) McKinsey calculates that on present growth trends, about 10m Germans would no longer receive middle class incomes. For a summary see this report in Frankfurter Allgemeine....MORE

From the Financial Times:

Slow growth in Germany sounds alert on poverty

More than 10m Germans could fall into poverty by 2020 because of insufficient economic growth, McKinsey, the consultancy, warned in a study yesterday.

The study coincides with the release of an Emnid opinion poll by Bild Am Sonntag, the weekly newspaper, showing three-quarters of Germans fear old-age poverty. It will add to a lively debate on the shrinking of the middle class.

Given annual gross domestic product growth of 1.7 per cent, those earning between 70 per cent and 150 per cent of the average income - the standard definition of the middle class - will make up less than half the population by 2020, against 54 per cent today, McKinsey writes.

Rising inequality between rich and poor, fear of long-term social and economic decline and simmering anger at the growing cost of living have risen to the top of Germans' list of concerns.

With gross domestic product per head having risen by only 1.4 per cent in the decade to 2006, Germany has lost ground to the US and European Union neighbours....MORE